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HR and Tax Newsletter-April 2001

EMPLOYEE BENEFITS

IRS liberalizes distribution rules for IRA's and Tax-Qualified Plans. Both IRA's and tax-qualified plans are subject to mandatory distribution rules that generally apply once an individual attains 70 . An important planning technique that is sometimes used is to delay the mandatory payout as long as possible. This permits the tax -deferred buildup over a longer period of time. Under the new regulations the mandatory payout period is generally extended. Moreover, the new regulations also liberalize the deadlines for naming beneficiaries. IRA owners have the option of following the new regulations in 2001, but participants in tax qualified plans cannot use the new regulations unless a short IRS model amendment is adopted.

EMPLOYMENT LAW

Arbitration clauses. The Supreme Court has upheld arbitration clauses in individual employment agreements. There is an exception is for agreements involving seamen, railroad employees, and other transportation workers. On the other hand, the Department of Labor has asserted in final regulations scheduled to become effective January 1,2002, that arbitration provisions in most health plans cannot cut off legal remedies although they can be used as part of the claims resolution process.

Covenants Not to Compete. The current Florida statute permits an employer to get an injunction if the employer can establish any legitimate business interest. The statute identifies a number of legitimate business interests including the protection of confidential business information that is not a trade secret.

Disability Pointer . The Americans with Disability Act does not protect an employee against the employee's misconduct even if that misconduct arises from the disability. For example, a mentally ill employee who gets into a fight is not protected from discipline even if his illness was a factor in starting the fight.

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